The Sport of Kings: Financing Class Actions in Ontario

• Author: Jean-Marc Leclerc
• Pages: 121-162

121

“THE SPORT OF KINGS”:

FINANCING CLASS ACTIONS

IN ONTA R IO

Jean-Marc Leclerc

Abstract: Class actions can be very ex pensive. Certif‌ication

motions are hotly contested. Trials can be long and expen-

sive. In Ontario, at every step of the proce ss, the representa-

tive plaintiff (and any law f‌i rm that agree s to indemnify the

representative plaint iff) can be liable for signif‌icant adverse

cost awards. For many years, t he Class Proceedings Fund

(the Fund) was the only option available for plaintiffs requir-

ing f‌inancial assistance. In exchange for 10 percent of any

settlement or judgment, the Fund would agree to provide

funding for disbursements and to be liable for any adverse

cost awards. More recently, other options have become avail-

able to plaintiffs requiring f‌ina ncial assistance to bring class

actions. Third part y companies have offered equivalent ar-

rangements to the Fund, at cheaper cost.

While the Fund’s assist ance is permitted by statute, there

is no equivalent statutory framework to regulate thi rd party

f‌inancing of cla ss actions. The issue potentially engages ques -

tions of champert y and maintenance, as well as other issues,

including the amount of control the funder should have over

the litigation itself.

The paper reviews the historical approach to third party

funding of clas s actions in Ontar io and the more liberal ap-

proach to these arrangements in recent years. It examines

how courts in other juri sdictions such as t he United King-

dom, the United States, and Austr alia have sought to regulate

and address third party f‌inancing of clas s actions. The paper

draws on these approaches to suggest a framework for third

party f‌inancing of class actions in Ontario.

123

“THE SPORT OF KINGS”: FINANCING

CLASS ACTIONS IN ONTARIO

Jean-Marc Leclerc*

A. INTRODUCTION

Class actions c an be very lucrative. They can be very expen sive too. This

is because Ontario applies the ordin ary rules on costs in class actions:

usually, the loser must pay a portion of the w inner’s legal costs.

In class actions, costs claimed by succe ssful plaintiffs and defend-

ants can be enormous. In a recent decision, a defendant who success-

fully opposed a f‌ive-day cer tif‌ication motion clai med $750,000 in costs

on a partial indemnity basis.1 It was ultimately awarded $525,000.2 In

contested certif‌ication motions, cost awards have ranged from $125,000

to $650,000 plus disbursements.3 Ontario’s Super ior Court of Just ice

recently observed that “certif‌ication motions are often strenuously op-

posed and involve many hours of preparation. . . . The amounts involved

. . . can be substantial.”4

Ordinarily, if a defendant is successful in a class action, it is the

representative plaint iff who is responsible for paying the costs award.

However, because the amounts that can be awarded to a represent ative

plaintiff if the claim is succe ssful can be very small compared to the po-

tential liabil ity to pay a costs award to a defendant, many plaint iff class

action lawyers will offer to indemnify a representative plaintiff again st

any adverse costs award. The effect of this is to make t he plaintiff ’s law

f‌irm liable for any adverse costs award, unlike the usual rule that makes

the party solely responsible for any costs award.

* Partner, Sotos LL P. An earlier version of th is paper was presented to t he OBA

class act ion colloquium in December 2011.

1 Fresco v Canadian Imperi al Bank of Commerce, 2010 ONSC 1036.

2 Ibid at pa ra18.

3 See summar y of recent cost awards cited in St rathy J’s decision in Singer v

Schering- Plough Canada Inc, [2010] OJ No 1243 at para 18 (SCJ).

4 Attis v Ontario (Minist er of Health), 2010 ONSC 4508.